Incentives for employers and employees can be extrinsic (i.e., monetary) or intrinsic and social. Intrinsic incentives are grounded on the individuals desire to perform a task for its own sake. Social incentives are driven by the relationships with co-workers in the workplace. When workers are socially or intrinsically motivated, it is possible for organizations to exploit a mix of extrinsic and intrinsic incentives. A recent economic literature has shown that, on the one side, social incentives might reduce free-riding and favour socially connected workers, on the other side performance-based incentives favour high ability workers (Bandiera et al., 2010; Bandiera et al., 2013). In some settings, the net effect of social incentives can be detrimental to a firm’s performance. Such evidence, however, accounts only for cases where incentives (monetary and non-monetary) are hierarchically imposed (top-down). What happens when incentives are co-designed with the involvement of employees? The aim of this paper is to fill a gap in the existing literature, analyzing the impact on workers’ performance of bottom-up participation in the design of incentives.
We consider the case of non-monetary incentives, and we focus on the impact of participation on the workers’ performance in terms of quality instead of productivity. To this end, we designed a natural field experiment to analyze the behavior of healthcare workers belonging to a large size Italian social cooperative, which delivers its services in three different carehomes for the elders. The main research question we will address is the following: does the participation of workers to the design of a non-monetary reward improve their qualitative performance? With our natural field experiment we try to expand the empirical understanding of the effects of participative management.
We focus on the process of introduction of a costless non-monetary reward, based on the day by day measurement of the employees’ quality of performance through a careful record of all employees mistakes. The experiments is organized in three periods: a pre-treatment period where we introduce a formal monitoring of mistakes (not linked to any reward); a treatment period where in two of the carehouses we introduce a recognition scheme; and a post-treatment period where we withdraw the recognition scheme while maintaining the monitoring of the employees’ mistakes. At the beginning of the treatment period, we exogenously engineer the introduction of the same reward at the same time in two carehomes, but with two different procedures. In one carehome (the "bottom-up" treatment), the reward was introduced only after workers’ discussion in a focus group, at the end of which they have the right to vote to decide themselves. In the second carehome (the "top-down" treatment), the same form of recognition was introduced top-down, but without any participation to the decision process by employees. The recognition system eventually chosen by workers was a one-to-one short meeting where the carehome director would congratulate them for the quality of their job. Our aim is to test if, when introducing this new incentive, managers can induce in employees a stronger motivation allowing for participation in the design of the incentive itself.
Our paper delivers several results. We find that the bottom-up treatment has strongly significant and large positive effect on quality provision with respect to the top-down group. We also find that these effects are persistent (that is the bottom-up group performs a few mistakes also when the recognition system is introduced). Furthermore, the introduction of the top-down treatment has adverse effects on quality provision with respect to the control group. This is reflected in higher number of mistakes and in "almost-uniform" distribution of mistakes.
Akerlof, G. A. (1982). Labor contracts as partial gift exchange. Quarterly Journal of Economics 97 (4), 54369.
Bandiera O., Barankay I., and Rasul I. (2010). Social Incentives in the Workplace, Review of Economic Studies, vol. 77(2), pages 417-458.
Bandiera O., Barankay I., and Rasul I. (2011). Field Experiments with Firms. Journal of Economics Literature, 25(3), 63-82.
Bandiera O., Barankay I., and Rasul I. (2013). Team Incentives: Evidence From A Firm Level Experiment, Journal of the European Economic Association, European Economic Association, vol. 11(5), 1079-1114.
Dal Bo, P., Foster, A. and Putterman, L. (2010). Institutions and behavior: Experimental evidence on the effects of democracy. American Economic Review, 100(5), 2205-2229.
Deci, E. L., and Ryan, R. M. (1985). Intrinsic motivation and self-determination in human behavior. New York: Plenum.
Dur, R. (2009). Gift exchange in the workplace: Money or attention? Journal of the European Economic Association 7 (2-3), 550560.
Frey, Bruno S. (1993). Does Monitoring Increase Work Effort? The Rivalry with Trust and Loyalty.Economic Inquiry, 31(4): 66370.
Kolstad, J. T. (2013). Information and Quality When Motivation Is Intrinsic: Evidence from Surgeon Report Cards. American Economic Review, 103(7), 2875-2910.
2. Social innovation and social entrepreneurship
